When bonds compete with stocks for yield in a rising interest rate environment, stocks loose. We are at a point in the market where bonds, the safest of bonds, are competing with stocks for investor dollars and the bonds are winning. Wouldn’t you rather invest money in US Treasuries rather than stock? You know that you will be paid and that you likely will not lose a dime if, you hold the securities until maturity. Thus, you have removed the risk of the trade while continuing to receive a similar yield on the issue. That said, watch your maturity levels. You are not being paid enough for long dated bonds therefore opt for the shorter bonds, say two to seven years out. So what happens if the FOMC raises rates, as they are likely to do, again? Well the value of your bonds will decline. Before you panic, remember that you will be paid in full, face amount of the bond, if you hold the bond to maturity and while waiting you will receive interest payments. Unless you are a bond trader, this should clam your nerves somewhat.

As to stocks, remember that US companies that do not export products will not be affected by tariffs. Look for domestic investments that have no exposure to a trade war and rely on sales here in the USA. Look for companies that will have growth, have insider ownership and are stock holder friendly.

The S&P 500 September future’s contract gained 1.25 handles (points) in the Friday session. The market traded up to 2745.50 early in the session before losing almost all of its gains. The sell—off began at 3:00pm, closing the session very near to where it began the day session, leaving a doji candle stick on the chart. This market has a wide trading zone from 2678.50 to 2810.75 along with an inside trading zone of 2693.25 to 2796.75. The Bollinger Bands are flattish at this time. The trading channel lines are 2774 to 2691.75. If this market can close above 2746.775, it will open the door to 2774. The most frequently traded price were 2729 – 2930 but the heaviest volume was seen at 2721 where 8.5% of the day’s volume traded. The RSI is 37.86 which is nearing oversold levels. Our own indicator is issuing a buy-signal as is the fast stochastic indicator. Friday’s session was the end of the second quarter and as such we did see some portfolio adjustments and very high volume to the downside, in the last hour of trading. Not only that, we noticed that the bulls were in control for most of the day until the last hour of trading when, the bears elected sell orders removing most of the day’s gains.

The NASDAQ 100 gained 7.25 handles (points) in the Friday session. The Bollinger Bands are beginning to expand a bit which indicates that the market could be calming down a bit. All the indicators that we follow herein continue to issue a buy-signal. So long as 6956 holds, we will likely move to the upside with minor resistance at 7151.60. The NASDAQ 100 suffered the same 3pm sell-off that the S&P 500 did. The main difference between the two was that the NASDAQ 100 tried to recover at about 3:30pm but was only able to recover 5 handles from the bottom of the trading day. The most frequently traded prices were 7088.25 – 7091.50 but the highest volume was seen at 7094.75 where 13% of the day’s volume traded. If the action seen in the Friday session was only portfolio adjustments for the end of the quarter, it is likely much of it will be reversed in the coming days.

The US Dollar Index lost 0.886 in the Friday session leaving a very large red candlestick on the chart. Both the fast stochastic indicator and the RSI have turned down and are issuing a sell-signal. The Bollinger Bands seem to be expanding slowly. When looking at the weekly chart, you can see how aggressive the US Dollar index has been. This action is not good for US merchants sell US goods and service abroad insomuch as our exports are being priced out of the market by the strong US Dollar. We see initial support at 93.83 and at 92.83. We would not be surprised to see this market trade to the downside a bit as it consolidates recent gains.

Crude oil gained 0.80 handles (points) in the Friday session. The Bollinger Bands are expanding. Both the fast stochastic and the RSI are overbought. We can remain in the condition for some time, called bullishly overbought. Our own indicator has just given a sell-signal. Crude oil has broken above the 72.80 resistance line. We would expect to see this line tested in the near future. Basically crude looks bullish but we need to see some of the gains digested before the next thrust higher. The next resistance level is 78.42 and then…..82.79.

Gold gained 3.2 handles (points) in the Friday session. The Bollinger Bands are expanding and both the stochastic indicator and the RSI are issuing a buy-signal from oversold levels. We noticed that the gold market tested the low printed in the Thursday session and rejected that low and printed a high high in the Friday session. That said, we would not look for a recovery until or unless the product closes above 1257.4.

Risk
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Past performance is not necessarily indicative of future results.
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